Because we’re a mortgage company, we like statistics. We watch everything from inflation data to home values. Occasionally, one of these statistics is just so good that we have to share.
According to new data released by Black Knight Financial Services, Americans took a collective $22.6 billion in equity out of their homes in the second quarter of this year – the highest quarterly numbers since the second quarter of 2009. Moreover, cash-out refinances made up 42% of the overall refinances in the quarter.
It’s easy to understand why the cash-out option would be so popular. Everybody likes a little extra money in their pocket for everything from home improvements to college funds to a retirement boost.
Still, a couple of characteristics of the current market make it a particularly attractive time to take advantage of your home’s investment potential.
Home Values Are Rising
Home values are up 7.78% on the year. Home value is a key piece to the equity puzzle, along with the payments you make every month. As home values rise, you gain more equity in your home faster because it’s measured by the amount you owe relative to the value of the property.
In a market where home values are going up, the cash-out option can be particularly attractive because people have more equity to play with. This means you can pull more out of your house to reinvest elsewhere as you see fit.
Obviously, markets are cyclical. What goes up eventually comes back down, which is all the more reason to strike while the iron is hot.
Rates Are Low
Rates are still at or near historic lows. It’s a great time to get a mortgage because you could conceivably take cash out while lowering your rate and still pay the same amount or less each month as you pay now. If you shorten your term, you could also end up paying far less interest over time.
Like home values, interest rates have their ups and downs. We’ve had roughly eight years now of rock-bottom interest rates. The Federal Reserve has employed a couple of different strategies to push interest rates down. The Fed chooses to keep rates low during a recession in order to encourage people to buy houses and cars, which stimulates the economy.
Now that the Fed sees the economy getting better, it wants to push the rate it charges banks to borrow money back up. This has a couple of positive effects for consumers. Higher interest rates mean you’ll earn more in interest on the money in your savings account. It also makes the U.S. dollar stronger relative to other countries. This is good because imports from other countries then become cheaper for American consumers.
The downside to this is that the cost of borrowing money, including money to buy our homes, will likely go up. No one knows exactly when the nation’s central bank is going to raise rates, but all indications are that it’s going to happen soon.
If you’re looking to take cash out of your home, now is the time to act and lock in your rate before rates go up. You can get started online, or if you prefer, you can give us a call at (888) 728-4702.
If so, subscribe now for tips on home, money, and life delivered straight to your inbox.